Published 5:23 pm, Wednesday, August 22, 2012

As it gathers cash to reduce long-term debt, Chesapeake Energy has put Permian Basin assets on the block.

Divided into three packages, one set of assets located in the Midland Basin is expected to be sold in a purchase and sale agreement to affiliates of EnerVest Ltd. of Houston. The deal is expected to close in the third quarter.

Representatives with EnerVest declined to comment on the deal since it has yet to close. But they say the company has been active in the Permian Basin, primarily the New Mexico portion, for the past five years.

In a conference call with analysts earlier this month, Chesapeake officials not only disclosed the agreement with EnerVest but said bids have been accepted on two other packages, located in the Texas and New Mexico portions of the Delaware Basin with purchase and sale agreements expected in the next month and closing in the third quarter.

Chesapeake had put more than 1.5 million acres in the Permian Basin on the block, and Chesapeake Chief Executive Officer Aubrey McClendon, noting that not all the acreage was covered in the sales agreements, told analysts Chesapeake could develop the remaining acreage itself or offer it in another round of bidding.

The assets had been offered in a single package, he said, but there were also three packages in the data room.

"There are lots of different ideas there," he told analysts in the conference call. "There are other producers who were maybe intimidated by the size of the package." With the production taken out, he said, companies who prefer to grow through the drill bit might take a second look at Chesapeake's remaining acreage.

"We've got a lot of options there and this is just kind of emerged in the last few weeks that we will go through what is frankly a fourth process to finish up an exit from the Midland Basin side of the Permian," McClendon said.